In a chat with ET Now, Sukumar Rajah, MD, Franklin Templeton Investment, gives his views on the budget.

What is your assessment of the budget?

The budget is on expected lines. I think the finance minister has continued with moderate taxation and is hoping for increase in revenues because of strong economic growth. So generally the direct and indirect taxation is on the expected lines.

What about the current account deficit that has been laid at 4.6%? Should the market really read into the 4.6% fiscal deficit number as really being a realistic estimate of where things stand on the inflation calculation front?

Based on the first cut analysis, it looks like the government is expecting 20% plus revenue growth which will depend on the profitability of the corporate sector because a big portion of the growth in revenues is going to come from corporate income tax growth and that will depend on the earnings growth for the market continuing at the expected trajectory.

There are obvious risks to that because a lot of companies are missing estimates and there are concerns about certain sections of the industrial sector. They seem to be losing momentum. So there is a risk that the revenues could under perform estimates.

The second issue is that the subsidies have been assumed at a certain level and it will be very difficult to actually realise if oil prices remain at the current levels or anywhere close to the current levels. So I see two obvious risks to achieving the fiscal deficit targets.

In terms of FII participation or the limit being enhanced on infrastructure bonds, specially with the residual maturity of 5 years plus, it is really giving an indication that they would want capital to come in and locked in for a longer period of time than just have liquidity come in and go out depending on market situation.

It is a necessity this year because last year we had very strong equity inflows and it is quite unlikely that equity inflows will be of the same order in 2011 as it was in 2010. So we need to diversify the sources of funds and fixed income is one such opportunity. So it is more of a necessity at this point of time to diversify the range of products to which foreign capital can flow into the Indian market.

What about the divestment figure that has been laid out at 40000 crore? What is your own sense about it given the current market situation? How perhaps would the issues of SAIL and ONGC received by the market and also whether the government will be able to achieve this target?

Achieving divestment targets has always been a function of the market. Certain amount of buoyancy in the market is required to achieve the divestment targets. We need liquidity flowing into the markets which is function of the confidence in the markets and relative attractiveness of the market compared to other markets.